Analyzing Gladstone Commercial (GOOD) & HFF (HF)

Gladstone Commercial (NASDAQ: GOOD) and HFF (NYSE:HF) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, risk, valuation, dividends and analyst recommendations.

Earnings and Valuation

This table compares Gladstone Commercial and HFF’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Gladstone Commercial $94.80 million 5.17 $5.93 million $1.52 11.35
HFF $609.48 million 2.42 $94.96 million $2.47 15.42

HFF has higher revenue and earnings than Gladstone Commercial. Gladstone Commercial is trading at a lower price-to-earnings ratio than HFF, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Gladstone Commercial and HFF’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Gladstone Commercial 6.26% 2.36% 0.68%
HFF 15.58% 41.13% 8.87%

Analyst Ratings

This is a breakdown of recent ratings and price targets for Gladstone Commercial and HFF, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Gladstone Commercial 0 3 2 0 2.40
HFF 1 3 0 0 1.75

Gladstone Commercial currently has a consensus target price of $21.33, indicating a potential upside of 23.67%. HFF has a consensus target price of $41.00, indicating a potential upside of 7.67%. Given Gladstone Commercial’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Gladstone Commercial is more favorable than HFF.

Volatility and Risk

Gladstone Commercial has a beta of 0.78, meaning that its stock price is 22% less volatile than the S&P 500. Comparatively, HFF has a beta of 0.92, meaning that its stock price is 8% less volatile than the S&P 500.

Insider and Institutional Ownership

54.6% of Gladstone Commercial shares are held by institutional investors. Comparatively, 89.9% of HFF shares are held by institutional investors. 2.0% of Gladstone Commercial shares are held by company insiders. Comparatively, 5.7% of HFF shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Dividends

Gladstone Commercial pays an annual dividend of $1.50 per share and has a dividend yield of 8.7%. HFF does not pay a dividend. Gladstone Commercial pays out 98.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

HFF beats Gladstone Commercial on 11 of the 16 factors compared between the two stocks.

About Gladstone Commercial

Gladstone Commercial Corporation is a real estate investment trust focused on acquiring, owning, and operating net leased industrial and office properties across the United States. Including payments through January 2018, Gladstone Commercial has paid 156 consecutive monthly cash distributions on its common stock. Prior to paying distributions on a monthly basis, Gladstone Commercial paid five consecutive quarterly cash distributions. The company has also paid 144 consecutive monthly cash distributions on its Series A Preferred Stock, 135 consecutive monthly cash distributions on its Series B Preferred Stock and 20 consecutive monthly cash distributions on its Series D Preferred Stock. Gladstone Commercial has never skipped, reduced or deferred a distribution since its inception in 2003. Further information can be found at www.GladstoneCommercial.com.

About HFF

HFF, Inc. provides commercial real estate and capital market services to the users and providers of capital primarily in the United States commercial real estate industry. The company offers debt placement services, such as construction and construction/mini-permanent loans, adjustable and fixed rate mortgages, entity level debts, mezzanine debts, forward delivery loans, tax exempt financing, and sale/leaseback financing to the owners of various properties comprising office, retail, industrial, hotel, multi-housing, student housing, self-storage, senior living, independent living, assisted living, nursing homes, condominiums and condominium conversions, mixed-use properties, and land. It also provides investment advisory services to commercial real estate owners; and equity placement and private equity alternatives and solutions, as well as assists clients in the sale of their commercial real estate debt note portfolios. In addition, the company offers private equity, investment banking, and advisory services, including equity capital to establish joint ventures relating to identified properties or properties to be acquired by a fund sponsor; private placements of preferred securities; advisory services for mergers and acquisitions, sales and divestitures, management buyouts, and recapitalizations and restructurings; and institutional marketing and fund-raising for public and private commercial real estate companies. Further, it provides loan sales and commercial loan servicing to life insurance companies. The company was founded in 1982 and is based in Dallas, Texas. HFF, Inc. is a subsidiary of HFF Holdings, LLC.

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